PART 2: The center of the doughnut (our empty coffers)

[donsu]

http://www.atimes.com/atimes/Global_Economy/GA07Dj01.html

(PART 1: Why the emperor has no clothes )


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Now, what if we look at the world as a doughnut, analogous to so many cities in the US rust belt. The center is derelict and hollowed out as production and consumption have moved to the surrounding suburbs (in automobile capital Detroit, the windows of the principal department store Hudson's have been boarded up for years, even as the city has built an expensive "Renaissance Center" to re-gentrify the center, a process that has "succeeded" in some other cities). General Motors' derelict Flint, Michigan, gave us Michael Moore, who featured it in Roger and Me (a reference to GM chief executive officer Roger Smith). We might look at the entire world in doughnut terms, with the whole of Uncle Sam in the empty hole in the middle that produces almost nothing it can sell abroad. The main exceptions are agricultural goods and military hardware that are heavily subsidized by the US government from its taxpayers and its dollar-printing press, and even so Uncle Sam runs a US$600-billion-plus budget deficit.

(let's read that again: "with the whole of Uncle Sam in the empty hole in the middle that produces almost nothing it can sell abroad.")

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Should the dollar crash ...

The big difference in this US doughnut is that both the budget deficit and the $600-billion-plus trade deficit are financed by foreigners, as we have seen. Uncle Sam would exclude most of them as persons, but gladly receives the real goods they produce. As world consumer of last resort, as already suggested, Uncle Sam performs this important function in the present global political economic division of labor: everybody else produces and needs to export, and Uncle Sam consumes and needs to import. The crash of the dollar would (will?) crumble this entire world-embracing and -organizing political economic doughnut and throw hundreds of millions of people, not to mention zillions of dollars and their owners, into turmoil, with unforeseen and perhaps unforeseeable consequences.

Many people, high and low on the world totem pole, have a big stake in avoiding that, even if it requires continuing to blow an empty Uncle Sam up like a balloon. Or to refer to a well-know metaphor, to continue to pretend that the emperor with no clothes is dressed up. That still includes China, for which a financial showdown with Uncle Sam would be a blessing in disguise: it would oblige China to change its political economic course, and instead of giving its goods away for free to Uncle Sam, to turn production and consumption inward to its poor interior and outward to its neighbors in East Asia, all of which it could and should be doing already. (The latter China has recently begun to do, but not yet the former.)

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Thus, the Uncle Sam Ponzi Scheme poses the world's biggest and craziest Catch-22 since MAD (mutually assured destruction).

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All about oil

Not only does Uncle Sam have to buy ever more oil, today with self-printed dollars, but perhaps tomorrow with euros or yuan, he also has to try to make sure to have his hand on every spigot so he can control who else can, and especially who cannot, buy it. So that is why we now find him attempting political and financial control of the oil spigots, wherever he still can, and going in also for military presence as in Central Asia, or using military power to go in, as Iraq. That is both to use it as a lever of control and/or to warn its neighbors what may happen to them if they fail to continue to play along with Uncle Sam. Fortunately for him, most of East Asia and especially China also seem to be obliged to buy foreign oil, even if tomorrow perhaps no longer with dollars but with yuan/yen. On the other hand, sad but true, the world's biggest seller of oil is Russia, whose spigots remain beyond Uncle Sam's control. But how could Uncle Sam continue to pay for and maintain all these bold ventures in defense of freedom with those self-made paper dollars if nobody accepts them anymore?
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oil, oil, oil, oil, oil, oil, oil,